11/11/2009

The House of Representatives introduced a new bill that would extend the ARRA Act’s COBRA premium subsidy 6 months. The bill would also extend COBRA subsidy eligibility to a new group of laid off workers.

COBRA Subsidy Recap:

As you may already know, the government passed a law giving employees who were “involuntarily terminated” between September 1, 2008 and December 31, 2009, a 65% COBRA health care premium subsidy. The COBRA subsidy became available to these Assistance Eligible Individuals (AEIs) March 1, 2009. AEIs could collect the subsidy for 9 months or until their COBRA eligibility ran out, whichever came first.

If the House’s proposed bill becomes a law, here’s what would happen:

The COBRA subsidy would be available to AEIs for 15 months.

Individuals who were laid off between January 1, 2010 and June 30, 2010 would become eligible for the subsidy.

COBRA subsidy doubles election rate:

In the time since the ARRA Act’s COBRA subsidy became effective, the number of Assistance Eligible Individuals (AEIs) opting for COBRA coverage doubled to 38%. This is a clear message that people want health insurance and will pay for it when the premium becomes more affordable. The Obama administration is currently looking into whether or not the subsidy should be extended.

As of now, we don’t know if it will be extended or if more workers will become eligible, but you can definitely count on us to keep you posted.

07/15/2009

Under the American Recovery and Reinvestment Act (ARRA), COBRA premium Assistance Eligible Individuals (AEIs) who believe that they’ve been wrongfully denied subsidized coverage may apply for an expedited review of their status by one of two federal agencies, the Department of Labor (DOL) and the Department of Health and Human Services Centers for Medicare & Medicaid Services (CMS) . Once an AEI applies for expedited review, the DOL or CMS must complete the review within 15 business days.

Individuals who wish to apply for expedited review appeal directly to the federal agencies. Unless either of the agencies contacts them with inquiries for additional information, no further employer action is required.

The DOL and CMS have finalized the application forms that individuals must use and have published them to their websites respectively. Individuals may print a copy of the form and mail or fax it back to the respective federal agency. Individuals using the DOL form may alternatively elect to complete the form online. Which agency’s form the individuals complete is determined by the type of group health coverage they had at their former employer.

Only Assistance Eligible Individuals (AEIs) formerly covered under private-sector group health plans may download and complete the DOL application. Government employees (both federal and state) as well as covered under their state’s “mini-COBRA” law (i.e. companies with fewer than 20 employees for 50% or more of the past calendar year) must use the CMS’ comparable application.

What employers should keep in mind:

When determining COBRA subsidy eligibility for individuals formerly covered under private-sector group health plans, the DOL is not required to defer to your previous decision to deny coverage. The DOL is commonly inclined to rule in favor of an employee’s application.

It’s no secret that our economy is in a recession and companies have either laid off or are continuing to lay off workers. A recent Fox TV Rasmussen Report showed that 77 percent of Americans know at least one person who has been laid off from their job and 12 percent of Americans know at least 10 people personally who have been laid off. Given all these layoffs, one thing that employers should keep in mind is the heightened risk of violent retaliations associated with a layoff and with involuntary terminations in general.

While there is no guarantee that a worker will retaliate violently against an employer after being terminated, there is always still a risk. There are several steps that employers and HR professionals can put in place at their companies to help mitigate these risks and help protect all other employees.

1. Give as much warning as possible of upcoming layoffs (that way they will be less of a shock if your employees know they are coming).

2. When your company has selected a particular employee for lay off, explain to them exactly why they are being selected and frame your explanation in as positive a manner as possible (i.e. You are an incredibly hard worker and a wonderful asset to this company, but we have discontinued the product that you work on and we need to let you go.)

3. Most importantly, have a plan for all the logistical aspects of a layoff, starting with deciding whether they will be done individually or as a group. Will terminated employees be allowed to go back to their desks and clean them out themselves or will someone gather their belongings and bring them to the termination site? Either way, make sure to have strong bags or boxes ready. How will you protect confidential information, contact lists and computer files?

4. Treat laid-off employees with dignity. If possible, help them to avoid the layoff “walk of shame”. For example, layoffs could be scheduled during the lunch hour so fewer employees see former co-workers leaving the building with their belongings.

5. While you are laying an employee off, verbally explain issues such as severance packages, unemployment benefits and continuation of insurance coverage under COBRA. You should also send them a letter about these issues. Most employees have a difficult time processing what they hear when they are very upset.

6. Last but not least, in anticipation of a worst-case scenario, have heightened security measures in place, especially during a big week of layoffs or when you are laying off someone you know has a short temper. When you are concerned about safety issues, plan to do the layoff in a room close to an exit door where the terminated employees do not have to walk through an area filled with co-workers on their way out. Finally, never let the employees being terminated sit between the HR Director and other “messengers” and the door, blocking your escape route!

One thing HR professionals know is that you need to document everything that’s regulated, and COBRA is highly regulated. As you may already know, the 65% of a former employee’s COBRA premium that you, the employer, pay to the insurance carrier up front is subsidized through a refund or reimbursement on the newly updated Form 941. But, in order for your company to actually get this reimbursement, the IRS requires you to maintain a considerable amount of supporting documentation.

According to the IRS, employers and other COBRA-payable entities must maintain the following:

Information on the receipt, including dates and amounts, of the employees’ 35% share of the premium.

For insured plans, a copy of the invoice or other supporting statements from the insurance carrier, as well as proof of timely payment of the full premium to the insurance carrier.

An attestation, including termination dates, that employees were involuntarily terminated between September 1, 2008, and December 31, 2009. (i.e. an ex-employee’s termination letter)

Proof that employees and dependents were entitled to COBRA at any time between September 1, 2008, and December 31, 2009, plus their COBRA election documentation.

A record of employees’ Social Security numbers, the amount of the subsidy reimbursed with respect to each COBRA-covered employee, and whether the subsidy was for one individual or two or more individuals. (we recommend that employers keep a log of this information)

Did you know that your company needed to maintain all of this information?

Does your Fiscal department know about these requirements?

Do you have the steps in place to be sure the necessary documentation and information is kept track of for COBRA subsidies?

This is just some of the vital information you need to know about the ARRA COBRA subsidy and the new employer requirements it has created.

Even before the ARRA Act went into effect this February and the federal COBRA subsidies began, it wasn’t always easy to follow what was, and was not, applicable to an individual and their family. To make matters more complicated, although COBRA is a federal law, some states, such as Massachusetts, have their own legislation that may or may not apply to a specific individual’s situation.

One example of an area that isn’t so easy to comprehend, but is vital to everyone, is the “Marriage Penalty.” Here’s the million-dollar question on this issue: If a married employee is laid off, and his or her spouse’s employer offers health insurance, is he or she still eligible for subsidized COBRA coverage with a former employer?

Under the ARRA Act, the answer to this question is NO. The ARRA COBRA subsidy is NOT extended to otherwise assistance eligible individuals (AEIs) whose spouses are currently employed and are currently enrolled in their employer’s health insurance plan.

In Massachusetts, where individual health insurance coverage is required, the state legislation would then kick in, and these otherwise AEIs would have two options:

1.Take unsubsidized family coverage on their spouse’s plan, or

2.Go to the Commonwealth for coverage.

In most other states, their options would be to either take unsubsidized family insurance on their spouse’s plan or remain uninsured.

The goal of the ARRA COBRA subsidy was to help make sure that newly unemployed Americans could afford to have health insurance coverage– thus, avoiding financial devastation due to unforeseen medical costs or illness. Our legislators have clearly dropped the ball here. Monthly premium costs for most family plans come in around $1,200+ per month, and employer contribution percentages for these plans generally remain low.

So an estimate for the average additional cost that a married couple would incur, if they needed to switch from both spouses having individual insurance through their respective employers, to one spouse getting laid off (and both spouses now having to take the family plan through the employed spouse’s employer), would be $400 dollars.

A married couple with only one income would be saddled with $400 extra dollars per month, right at the time that one of them has lost their job. This is supposed to be a stimulus?

Fortunately, new answers to affordable health coverage are starting to pop up, and although these are far from perfect, we can (sadly) count on the ever-growing number of uninsured American families to inspire more and more alternatives in this area.

If you or your spouse has recently terminated employment and lost health coverage, make sure to check the various subsidies or health insurance options that your own state may offer. A simple Google search should get you started. Remember that even choosing a high-deductible medical insurance that covers only “major medical” illnesses and injuries could be a financial life saver down the road.

For the purposes of the new ARRA Act COBRA subsidy, determining who qualifies as an Assistance Eligible Individual (AEI) due to an “involuntary termination” is a lot more complicated than many HR professionals think. That’s why the IRS released Notice 2009-27 on April 1, 2009 and included in it both a definition and further clarification of “involuntary termination” when dealing with the COBRA subsidy. With just two weeks left to notify all AEIs of the new COBRA subsidy, HR professionals must know what exactly “involuntary termination”means, what it includes and what it excludes. That way they can ensure compliance by notifying everyone about the subsidy and not inadvertently leaving anyone out.

The Notice defines an “involuntary termination” as:

“a severance from employment due to the independent exercise of the unilateral authority of the employer to terminate the employment, other than due to the employee’s implicit or explicit request, where the employee was willing and able to continue performing services”

based on all the facts and circumstances.

For COBRA Premium Assistance purposes, the facts and circumstances are what determine whether a termination is involuntary.

This means that under the IRS Notice 2009-27, a termination otherwise deemed “voluntary” (or a resignation) will be considered involuntary if the facts and circumstances indicate that the employer would have terminated the employee anyway and that the employee knew that his or her employment would be terminated.

In Notice 2009-27, the IRS gives examples of situations where the terminated employee would be eligible for COBRA due to the fact that his or her termination was deemed “involuntary” given the facts and circumstances. These circumstances include, among other things:

Failure of an employer to renew an employee’s contract at the time it expires (provided that the employee in question is willing and able to continue work under the contract)

Constructive discharge

Involuntary reduction in an employees work hours to zero resulting in loss of health coverage

Early retirement of employees who would have been laid off otherwise

Voluntary termination of employment due to an employer-initiated material reduction in the employee’s work hours or material change in the geographic location

Voluntary termination in return for a severance package (i.e. a buy-out) offered to the employee by his or her employer.

The many changes to benefits under the recent American Recovery and Reinvestment Act (ARRA) legislation are certainly complicated. For instance, there’s been an increase in the monthly statutory limit to commuter benefits, which has gotten very little attention in the media and risks being overlooked by many employers. Although employers and HR departments should be responsible for absorbing and disseminating ALL legislative changes and information, the reality of managing that – on top of countless other responsibilities – is difficult at best.

Having an insurance broker who expertly navigates all of these changes and relieves your company of countless hours of research – and possibly even takes time-consuming and costly burdens such as COBRA administration and off your back – is one way to provide your company with a solid foundation for compliance. It also saves you from missing any of the subtle updates and revisions to the legislation (such as the recent IRS announcement that Line 12b on subsidy Form 941 should be calculated and entered based on each individual receiving a subsidy, regardless of the number of people benefiting from that subsidy).*

When your HR team is freed up from the endless hours they spend on benefit administration, COBRA, and fielding routine questions about coverage, they will be far more available to do what they do best – RECRUITING AND RETAINING TOP EMPLOYEES.

ARRA Act Changes to Commuter and Transit Benefits:

Effective as of March 1, an amendment to Code Section 132 (f)(2) raises the monthly limit for qualified transit passes and commuter vehicle expense benefits (the two of these reaching a combined maximum benefit) from $120 to $230 per-month. Employers now have the option of allowing participants to make or change their commuter and transit benefit elections accordingly. The ARRA Act also contains a sunset provision so that the increase in the monthly limit will expire on December 31, 2010 (unless it is extended in future legislation, which is possible).

Keep in mind that with these changes, there are stipulations worth noting. For instance, the effective date of the change in the maximum amount will be effective the first of the month following notification.

The new COBRA laws enacted in February will allow millions of Americans to keep their medical benefits, but they will also create an undeniable administrative burden for employers. Here’s a little background AND what has to happen for you to meet that burden and be sure that you’re in line with the new legislation.

On February 17th, 2009, President Obama signed the “American Recovery and Reinvestment Act (ARRA)” into law. “ARRA” provides a partial subsidy of COBRA and state mini-COBRA premiums to qualifying “assistance eligible individuals” (AEIs), their spouses, and their dependents. Premium assistance for these individuals began on or after the date the law went into effect and at this point lasts through December 31, 2009.

Once eligibility is determined according to the parameters of the law, here’s what employers need to DO to be in concert with the legislation.

What Employers Need to DO

COBRA subsidies became available starting March 1, 2009. The employer must take the following actions promptly, if they have not done so already.

1. Notices to re-enroll for current COBRA recipients:

Qualified beneficiaries who are currently on COBRA must make a new election to establish premium assistance under ARRA. You must send these individuals COBRA re-election notices with their new temporarily subsidized rates.

The ARRA legislation applies to all assistance eligible individuals whose dates of involuntary termination extend back to September 1, 2008. These individuals who did not initially elect COBRA or who have allowed their COBRA coverage to lapse now have a special extended COBRA election period (beginning February 17, 2009 and ending 60 days after they receive an employer-provided notice). Thus the employer must track down all employees whose coverage has been terminated since September 1, 2008 and send them the newly required subsidy availability and election notice.

3. Finally, Emplouers must notify insurers of who is participating in the newly-subsidized COBRA coverage.

Please note that if you fail to provide timely notification (i.e. within 60 days of the Act becoming a law– by mid-April at the absolute latest) to all Assistance Eligible Individuals (AEIs), you are subject to standard COBRA penalties under ERISA (up to $110 per-day). You may also be subject to excise taxes of $100 per-day per-notice under the Internal Revenue Code.

Can your company afford not to send all assistance eligible individuals timely notification?

The Department of Labor has been directed to update notices within 30 days of ARRA enactment, which has obviously passed (March 17, 2009) at the absolute latest. However, if you handle your company’s COBRA in-house you were also required to have an updated general notice by March 17, 2009 to reflect the changes brought about by ARRA to the COBRA law. So there is NO time to waste on this.

Finally, keep in mind that this is not cast in stone, for instance, the deadline on the legislation is the end of 2009, but that may be extended, and your state may also have legislation changes that must be followed. In the case of Massachusetts, for instance, some changes are even more aggressive. Be sure to stay on top of these issues – whether you’re an employer OR an employee. It’s a responsibility that you dare not overlook.

Our economy has obviously gone through some major hits over the last year. The new administration has taken on some major legislative changes in hopes of not only stimulating the economy, but also protecting families who have lost their jobs (or who will lose their jobs). Remember, until recently, the number one reason that families would go bankrupt was medical debt. Thus, encouraging hard-hit families to keep their medical coverage, even though they may be out of work, is a smart decision – and a meaningful one across the board.

President Obama signed the new “American Recovery and Reinvestment Act (ARRA)” into law in February of this year. This is a great thing for the ever-growing number of Americans who have lost their jobs over the last year. But like most COBRA legislation, it does create more work for employers.

ARRA provides a partial subsidy of COBRA and state mini-COBRA premiums to qualifying “assistance eligible individuals” (AEIs), their spouses, and their dependents. Premium assistance for these individuals began on or after the date the law went into effect (February 17, 2009) and at this point lasts through December 31, 2009.

Who is Eligible:

Assistance Eligible Individuals (AEIs) are qualifying COBRA beneficiaries and are defined as follows:

Have become eligible for COBRA continuation coverage on or after September 1, 2008 (and at this point before December 31, 2009).

Qualified for COBRA due to involuntary termination (for reasons other than gross misconduct).

Further, COBRA premium assistance is not available to individuals whose adjusted gross incomes exceed $145,000 annually (this number is $290,000 annually for joint-filers). Also, it’s important to note that for individuals whose annual adjusted gross incomes fall between $125,000 and $145,000 ($250,000-$290,000 for joint filers), COBRA subsidies are phased out through added taxes. Employees subject to these taxes can permanently waive their rights to a subsidy and pay the full COBRA premiums.

The ARRA legislation applies to medical, dental, vision and employee assistance programs. It does not apply to Medical FSA accounts (often called cafeteria plans).

How the COBRA Subsidy Works:

Premium subsidies are available to AEIs for up to nine months of their maximum COBRA coverage period. Subsidy amounts are based on the actual cost of COBRA premiums that the AEIs would otherwise incur.

Assistance eligible individuals will first contribute 35 percent of the monthly premium cost. The employer will then pay the remaining 65 percent and submit the payment to your insurer directly. The federal government will reimburse you for your contribution amount through a credit or refund of an overpayment of payroll taxes through the 941 Filing. The IRS will release an updated Form 941 that reflects this tax credit in the near future. If elected, subsidized COBRA coverage for the AEI will start the first of the month. His or her eligibility for COBRA subsidies will terminate on the earlier of the following:

• Nine months following their his or her date of COBRA election/re-election

• An offer of any new employer-sponsored health care coverage

• Medicare eligibility

Remember, these are the national, legislative changes in COBRA – and thus the minimum changes that you or your company must adhere to. Your STATE may also have legislation to be followed, and in some cases, it may be broader, etc. For instance, in the case of Massachusetts, the laws are far more aggressive and involved. Just be sure to be educated in this issue – whether you’re an employer OR an employee, this is a vital part of what’s happening right now.

Finally, remember to stay abreast of this. Right now the time limit on the legislation is December 31, 2009, but that may be extended in the future. Don’t assume that the dates are set in stone.